European Association for coal and lignite believes that the formula “Rotterdam+” was the only option to switch to the European pricing system in Ukraine, writes “Browser”.
European Association for coal and lignite (Euracoal) agreed that the formula “Rotterdam+” contributed to bringing the Ukrainian market in compliance with EU requirements. This is stated in the article “the Honored plus: why Rotterdam+ caused hysteria among his opponents,” published on the website “Obozrevatel”.
“European Association for coal and lignite (Euracoal) agreed that the formula “Rotterdam+” only contributed to bringing the Ukrainian market in compliance with EU requirements and was, perhaps, the only opportunity to make the transition from the old system to the European one in the circumstances. One way or another, required the presence of the regulator. According to the head NKREKU Oksana Krivenko, for two years, restraining the growth of prices was able to save about 40 billion, not to mention strategic security, as evidenced by a practice in early 2017, when the supply of coal from Ukrainian mines was blocked, but the stability of the power system is not affected”, – said in the article.
The author notes that the adoption of quasi-market mechanisms was due to complaints from the EU, demanding a transition to free pricing from 2012, when Ukraine joined the Energy community and pledged to gradually adapt its legislation to the norms of the Third energy package of the EU.
In August 2018 European Association for coal and lignite has prepared a report on the formula of “Rotterdam+”, which stated that “the pricing mechanism for coal in Ukraine is based on the API2 index (hub of North-Western Europe) with the addition of transportation from ARA (price region Amsterdam – Rotterdam – Antwerp), which is a reasonable approach.”
In Euracoal said that the API2 index is the best indicator of changes in coal prices for Ukraine for the following reasons: it is the most liquid index in the world; it is highly transparent; it is independently verified and includes a large number of prices, provided by both buyers and sellers; it is the index delivery, which obviously gives a more competitive price than FOB prices, which reflect pricing in only one place; Ukraine is part of Europe, so location is the relevant pool (Atlantic/Mediterranean).
According to the report, almost the entire coal business of Europe is linked to the API2 index. This index is also widely used to calculate financial transactions, whereby the participants can hedge price risks.
The formula “Rotterdam+” was introduced by resolution of the national Commission, carrying out state regulation in energy and utilities, dated March 3, 2017.
On August 23 last year, the national Commission carrying out regulation in the energy and utilities (NKREKU) abolished the formula of “Rotterdam” in connection with the onset of the new electricity market.
European Association for coal and lignite – Euracoal – is the umbrella organisation of the European coal industry.